The BLT: The Blog of Legal Times

Pepsi Wins FTC Approval for Bottler Deal

PepsiCo. Inc. won approval from the Federal Trade Commission today to buy its two largest independent bottlers and distributors for $7.8 billion.

But the FTC attached minor conditions to the deal. Because the facilities make and distribute soft drinks for Dr. Pepper Snapple Group, Inc. in addition to Pepsi products, the FTC will require Pepsi to put a "firewall" in place to limit access to confidential information about the rival brands.

“Without adequate safeguards, PepsiCo could misuse that information,” the FTC stated in its analysis of the consent order agreement. The FTC was concerned such conduct could eliminate competition between the two companies and “increase the likelihood that PepsiCo may unilaterally exercise market power, and facilitate coordinated interaction in the industry. In turn, that conduct could lead to higher prices for consumers.”

The firewall allows only employees who “perform ‘traditional bottler functions’” access to Dr. Pepper Snapple information. The consent agreement also calls for the appointment of a monitor to assure Pepsi’s compliance.

The deal for Pepsi to buy Pepsi Bottling Group, Inc. in Somers, NY and PepsiAmericas, Inc. in Minneapolis was announced in August. Together, the two facilities account for about 75% of all United States bottler-distributed sales of Pepsi’s carbonated drinks.

After the deal was announced, Pepsi sought a license from Dr. Pepper Snapple Group to continue to bottle and distribute the Dr. Pepper, Crush and Schwepps brands. In December, the two companies struck a deal that calls for Pepsi to pay $900 million for a 20-year license to distribute and sell those brands.

“We’re pleased that the FTC has cleared this merger so PepsiCo can begin to implement consolidation benefits that will flow to consumers from these transactions,” said Arnold & Porter partner Michael Sohn, who represented Pepsi along with partner Deborah Feinstein.

The pair previously represented Pepsi when FTC staff recommended challenging the company’s $14 billion purchase of The Quaker Oats Co. in 2001. The merger was ultimately approved by the commission.

Pepsi Bottling Group was represented by Mayer Brown partner Richard Steuer and counsel Jay Brown.

PepsiAmericas retained Michael Knight of Jones Day in Washington and James Long of Briggs and Morgan in Minneapolis.

Dr. Pepper Snapple turned to Jonathan Rich, a partner at Morgan Lewis & Bockius in Washington.

FTC lawyers who worked on the case include Joseph Brownman, Warren Stephen Sockwell, Jr., Joan Heim, Matthew Reilly, Norman Armstrong and Richard Feinstein.

Lawmakers Ask, What's Next for DOJ Ethics Office?

Today's hearing on whether the U.S. Justice Department was correct not to discipline two of its former lawyers, Jay Bybee and John Yoo, was an opportunity for lawmakers to explore the conduct of the department's ethics office.

The Office of Professional Responsibility spent more than five years investigating Bybee, Yoo, and others for their work on legal opinions that sought to define torture and answer other national security questions. The most controversial opinions, which authorized interrogation tactics such as waterboarding, were officially withdrawn during George W. Bush’s administration.

In a report released a week ago, OPR officials found that Bybee and Yoo committed professional misconduct in their work, but senior career Justice Department lawyer David Margolis overruled that finding.

Republican members of the Senate Judiciary Committee said today that they’ve lost some confidence in the Office of Professional Responsibility, wondering why it chose to investigate Bybee and Yoo in the first place. Sen. Jeff Sessions (R-Ala.), the committee’s top Republican, said the internal ethics office doesn’t have nearly the stature of the office that Bybee and Yoo worked in, the Office of Legal Counsel, which is charged with answering sensitive questions of constitutional and statutory interpretation.

“OPR is not an office that ought to be second-guessing the Office of Legal Counsel on constitutional questions,” Sessions said. “I don’t want to say they’re pedestrian. But they’re on a different level.”

Sessions and Sen. John Cornyn (R-Texas) said they want an investigation into whether OPR officials leaked their preliminary findings to the media in an effort to build public support. “How does OPR repair its credibility? Can it even do so?” Sessions, a former U.S. attorney, asked rhetorically.

Acting Deputy Attorney General Gary Grindler called leaks to the media “abhorrent” and said investigating them is a constant effort. “It appears from the [news media] articles that information that should not have been made public was made public,” he said.

Grindler defended the ability of the Office of Professional Responsibility to meet its core mission. “The attorney general continues to have confidence in OPR’s ability to investigate allegations of professional misconduct against department attorneys,” he said. Evaluating ethics cases, he added, “requires particular expertise, and the department continues to believe that OPR is the appropriate entity to conduct those investigations.”

Sen. Patrick Leahy (D-Vt.), the committee’s chairman, said the OPR report on Bybee and Yoo is incomplete because the office’s investigators did not have a chance to interview former Vice President Dick Cheney or David Addington, who was Cheney’s counsel and chief of staff. They also did not have all of Yoo’s e-mails, and Leahy today asked for the department to keep looking for them.

Plaintiff Seeks to Dismiss Discrimination Suit Against Crowell & Moring

A federal judge shot down on procedural grounds yesterday a former Crowell & Moring employee's effort to drop the age discrimination suit she had filed against the firm.

In July, Mona Saunders, 54, brought a $300,000 lawsuit alleging that she was fired after 18 years with Crowell because of her age. On Feb. 25, Saunders' lawyer filed a motion to voluntarily dismiss the suit.

But Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia answered back that Ardra O’Neal of The O'Neal Firm no longer has the power to drop the suit on behalf of her client.

Kollar-Kotelly wrote in a paperless order that “a plaintiff may dismiss an action by filing a voluntary notice of dismissal only if the opposing party has not served either an answer or a motion for summary judgment.” Crowell filed its answer to the allegations in August. In its answer, Crowell said Saunders was fired for failing to "perform her job in a satisfactory manner" and not because of her age.

The suit was originally filed in D.C. Superior Court, but it was moved to federal court in August. Saunders’ complaint claims that her supervisor at the firm routinely criticized her work and made her feel as though she was unable to learn new tasks because of her age. She was let go in July 2008.

Crowell declined to comment on the case, citing the ongoing litigation. The firm’s lawyer, Michael Stevens of Arent Fox, did not immediately return calls for comment.

O’Neal did not return calls for comment.

False Alarm Over Envelope at Federal Court

The contents of a suspicious envelope discovered last night at the U.S. District Court for the District of Columbia were found to be harmless, a court spokesman said this morning.

A hazmat team was called to the court around 5:30 p.m. yesterday after the envelope, which contained an unidentified white substance, was found in the mailroom.

“It was a suspicious package that was found to be harmless,” said court spokesman Sheldon Snook.

On Capitol Hill, DOJ Official Defends Decision on Torture Memos

Lawmakers got their first chance Friday to question the U.S. Justice Department about its decision not to pursue disciplinary action against the Bush-era lawyers who authored legal opinions on the use of torture.

At a hearing of the Senate Judiciary Committee, senators of both parties praised the work of the career Justice Department lawyer, David Margolis, who made the decision. Yet they emphasized different parts of Margolis’ 69-page memo — Republicans noting that Margolis cleared the lawyers of professional misconduct, Democrats noting that Margolis nevertheless criticized the judgment and work of those lawyers.

Lawmakers called for at least two further inquiries. Sen. Patrick Leahy (D-Vt.), the committee’s chairman, said he wants to know what happened to missing e-mails of one of the lawyers in questions, John Yoo, who is now a law professor at the University of California at Berkeley. Sen. Jeff Sessions (R-Ala.), the committee’s top Republican, said he wants to know who in the Justice Department leaked internal deliberations about possible discipline to the media.

Acting Deputy Attorney General Gary Grindler told the committee that he and the rest of the department’s leadership are confident in the decision Margolis made. Grindler said he knew of no instance in which the department’s political appointees overturned the conclusion of a career official in an ethics case, and he noted Margolis’ extensive experience in the department.

“His lengthy service as a career attorney who has served administrations of both parties makes Mr. Margolis uniquely qualified to decide matters of this sensitivity on the merits without fear or favor,” said Grindler, a former partner at King & Spalding.

At the same time, Grindler joined Democratic senators in rebutting suggestions that Margolis’ decision validates the legal opinions written by Yoo and by Jay Bybee, who is now a judge on the U.S. Court of Appeals for the 9th Circuit. Grindler said there has been a “shared conclusion” among department lawyers of both parties, including former Attorney General Michael Mukasey, that the legal opinions were flawed.

A report by the Justice Department’s Office of Professional Responsibility on Bybee and Yoo’s work mentioned eight legal opinions regarding interrogation and other national security policies. Grindler testified today that the department has officially withdrawn seven of those opinions, and that an executive order from President Barack Obama blocks enforcement of the eighth.

Leahy told Grindler to report back to the Judiciary Committee on the search for Yoo’s missing e-mails. Leahy said the situation reminds him of his unsuccessful attempts to obtain documents from the Bush administration. “We were always told that the information wasn’t there. We couldn’t get it. Then, we would eventually get it in the newspapers after it was leaked by the Bush administration,” he said.

Morning Wrap

Rep. Rangel Broke Ethics Rules: The Washington Post reports that Rep. Charles Rangel broke congressional gift rules when he accepted trips to Caribbean conferences that were paid for by corporate interests. The House did not find that the New York Democrat knew about the corporate backing for his trips, they did determine that his staff knew, which makes him responsible. He was ordered to repay the costs of the trips.

Health Care Reform: President Barack Obama signaled yesterday that Democrats are prepared to move forward on health care reform without Republican support, The Associated Press reports. It's a gamble for Obama and his party, and its uncertain whether Democratic congressional leaders can move a bill forward without reaching across the aisle.

Calling Judges to the Stand: Prosecutors handling the case against Web radio talk show host Harold "Hal" Turner, who is charged with encouraging listeners to murder three federal appellate judges, plan to call those judges to the stand. Lynne Marek of the NLJ reports here that prosecutors, who work in the U.S. Attorney's Office in Chicago, have won permission to have the three judges from the 7th U.S. Circuit Court of Appeals in Chicago provide testimony.

Killer Whale to Be Spared: Sea World Orlando has decided that it will spare the orca whale who attacked and killed his trainer earlier this week. Despite calls to destroy the killer whale, named Tilikum, Sea World says it is an important part of the breeding program and a companion to the seven other whales there, MSNBC reports.

ACLU to Seek Explanation for Redactions in OPR Report

The American Civil Liberties Union isn't satisfied with the heavily redacted Justice Department ethics report on the so-called torture memos and is planning to challenge the department for blacking out chunks of text.

Back in January, the ACLU sued Justice in the U.S. District Court for the District of Columbia in a complaint demanding the release of the ethics inquiry into opinions written by former Justice attorneys Jay Bybee and John Yoo of the Office of Legal Counsel.

The House Judiciary Committee on Feb. 19 released a copy of the Office of Professional Responsibility’s final report—261 pages excluding attachments and accompanying investigative papers and memos. The published report is laced with redactions. Some entire pages are blacked out.

An ACLU lawyer said today the organization has not been provided a Justice Department document that identifies and defends the redactions. A person or group seeking access to records can litigate redactions under Freedom of Information Act standards.

Yesterday, senior trial counsel Jacqueline Coleman Snead of Justice’s Federal Programs Branch said in response to the January suit that Justice considers the litigation over since the report has been published. The department’s response to the suit does not mention the redactions. Snead wasn’t immediately reached for comment today.

Assistant Attorney General Ronald Weich of the Office of Legislative Affairs said in a Feb. 19 letter to the House Judiciary Committee that the redactions include “classified and limited internal deliberative information.” Weich also said some text was redacted to protect privacy “although these enclosed documents still implicate significant individual privacy interests.”

Judge Rosemary Collyer today set a March 11 deadline for a briefing schedule in the case.

White Powder Discovered at D.C. Federal Courthouse

Updated 8:15 p.m.

A hazmat team arrived at the U.S. District Court for the District of Columbia this evening after an envelope containing an unidentified white powder was discovered in the mailroom.

The powder has been contained and nobody was exposed, said Ed Sloane, chief deputy of the U.S. Marshals Service for the District of Columbia.

Sloane would not confirm to whom the envelope was addressed. He said it was discovered at around 5:30 p.m.

As late as 7 p.m. there were several hazmat and fire department trucks lined up by the court's back entrance. Workers on the scene declined to comment.

But life inside the courthouse appeared to have gone on as usual. Security guards said the building had not been cleared. A group of law students exiting the building after a moot court competition said they had heard nothing about the unidentified powder.

"It was normal" inside, said Ben Hendricks, a first-year law student at Georgetown University Law Center.

Congress Concerned About Jobs, Sports, Diversity in Comcast/ NBC Deal

The heads of Comcast and NBC Universal made their case before the House Judiciary Committee today that their $30 billion merger will be "good for consumers, innovation and competition."

The most skeptical reaction came not from members of Congress, who seemed most concerned about potential job losses in their districts and the impact on local sports programming. Instead, it was left to panelists from media watchdogs and labor unions to gnash their teeth against the proposed combination.

“This merger is a competitive nightmare, and promises made by Comcast that it will behave are worthless,” said Mark Cooper, director of research at the Consumer Federation of America. “It’s a horrible merger.”

“The consequences of the deal will undermine American democracy,” added Andrew Schwartzman, president of the Media Access Project.

Larry Cohen, president of the Communications Workers of America, criticized Comcast’s record on dealing with organized labor and said the deal was “not in the public interest,” given its “potential to limit growth, investment and jobs.”

The proposed deal between Comcast, the nation’s largest cable operator with 23 million customers, and media and entertainment giant NBC Universal was announced in December 2009. The Justice Department’s Antitrust Division is reviewing the deal.

Comcast CEO Brian Roberts told the committee that the combined company will be “more creative and innovative,” and highlighted a series of public interest pledges the company has made in writing about local, children’s and public interest programming. He also promised “no massive layoffs, no closing of facilities.”

Rep. Jerrold Nadler (D-N.Y.) was one of the few members to probe the antitrust issues raised by the merger. “We’re told this is essentially a vertical integration, not a horizontal combination....To what extent are the companies horizontal competitors?” he asked.

Cooper of the Consumer Federation argued that the two companies compete “head to head” for local advertising dollars in 12 markets where NBC owns an affiliate. He noted the deal will also give NBC an advantage when it negotiates for carriage on other cable networks, and will allow Comcast to bundle more content together.

But NBC CEO Jeff Zucker said that competition would remain “vibrant and healthy” and that there were seven other broadcast stations in each of the markets where NBC and Comcast do compete.

Judge Allows Depos in Afghanistan Over DOJ Concern

Justice Department lawyers found themselves fending off judicial criticism this month in the federal district court in Chicago as they argued against a defense attorney's effort to depose several witnesses in Afghanistan in a bribery prosecution.

Kirby Behre, a Washington partner at Paul, Hastings, Janofsky & Walker, said the depositions in Afghanistan are essential because the witnesses and other evidence are there. At a hearing Feb. 16 in the U.S. District Court for the Northern District of Illinois, Behre said the witnesses he wants deposed have exculpatory information. And the witnesses, he said, have no desire to travel to the United States to participate at trial.

Behre, who spent three days in Kabul last December, said in court that the witnesses fear they’ll be buying a “one-way ticket” to the United States if they come here—and then are detained as material witnesses. (Behre unsuccessfully tried to get a government security escort for traveling in Afghanistan.)

Charges were filed against the Afghani company AZ Corp. and an owner, Assad Ramin, in Chicago in August 2008. Prosecutors say Ramin and others participated in a conspiracy to win Defense Department contracts through bribery. Behre represents both AZ and Ramin.

At the hearing earlier this month, lawyers from Justice’s Antitrust Division urged Ashman to reject the request for depositions in Afghanistan.

Trial attorney Kenneth Gaul said in court that Judge Ashman needs to be “very certain” that the defendants will suffer a constitutional deprivation before he sends “officers of the court into an active war zone where you’re putting the officers of the court, the witnesses themselves, the interpreters, and everyone else involved in the process in harm’s way.”

Ashman was puzzled. “That’s very strange coming from somebody from the government who refused to give security to the defense counsel who wanted some security in order to go to Afghanistan to investigate this case. That’s a very surprising comment. You guys can do it, but they can’t. That’s not fair, is it?”

An analysis of the risk is allowed when it comes to discussing depositions in a foreign country, Gaul said. “With regard to the dangerousness, look, I was there, and I know how dangerous it is,” Behre shot back.

The government knew of the danger in Afghanistan when it brought the indictment, Ashman said. He granted the defense request for depositions there.

Antitrust Division trial attorney Mark Rosman said the court hearing that the government is not interested in detaining the witnesses Behre wants to depose. "We would give them safe passage letters. We are not interested in them," Rosman said in court. Behre said the witnesses expressed skepticism over safe passage letters.

The Justice Department has not said whether it will challenge the ruling by asking U.S. District Judge David Coar to review it. No court papers had been filed by this afternoon.